Oftentimes, I’m asked about the concept of pre-revenue valuation for a startup. Well, that’s a very difficult thing because you’ve got no revenue and certainly no profit. How do you value this? In my opinion, the first step in the valuation of a company is to ask these 18 questions. These 18 questions cover five areas. First is trust; second is the idea; third is execution; fourth is the exit; and the fifth is enthusiasm.

1. Presented by: Andrew Stotz, CFA 29 April 2016
Pre-Revenue Valuation
18 Questions

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Five areas to consider
Source: A. Stotz Investment Research
Trust
Idea
Execution
Exit
Enthusiasm

3. 329 April 2016
Trust

4. 29 April 2016 4
Trust
Source: A. Stotz Investment Research
1. Do I trust this founding team?

5. 529 April 2016
Product Idea

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Idea
Source: A. Stotz Investment Research
2. How amazing is the idea? How do
people respond to it?

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Product proof
Source: A. Stotz Investment Research
3. What level of proof is there that
the product actually works?

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Pain
Source: A. Stotz Investment Research
4. Does the product solve a real pain
point? Who REALLY needs this?

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Disrupter
Source: A. Stotz Investment Research
5. Is the product a disrupter?
(If yes, then market pain may not be
necessary)

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Industry
Source: A. Stotz Investment Research
6. What is the industry's size and
growth? Is the addressable market
massive?

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Revenue
Source: A. Stotz Investment Research
7. What is the revenue potential?
How complete and compelling are
the 5 year revenue forecasts?

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Intellectual property
Source: A. Stotz Investment Research
8. What is the intellectual property?
Is it protectable?

13. 1329 April 2016
Execution

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Plan
Source: A. Stotz Investment Research
9. How thorough is the business
plan?

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Competitors
Source: A. Stotz Investment Research
10. Who are the direct competitors?
How will they respond?

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Customers
Source: A. Stotz Investment Research
11. Has the exact customer segment
been clearly identified?

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Startup experience
Source: A. Stotz Investment Research
12. How many startups have the
founders been involved in?

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Industry experience
Source: A. Stotz Investment Research
13. What is the founding team's level
of industry experience?

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Marketing
Source: A. Stotz Investment Research
14. How thorough is the marketing
plan?

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Partners
Source: A. Stotz Investment Research
15. Have potential partners or
customer/partners been identified?

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Sales experience
Source: A. Stotz Investment Research
16. What sales experience does the
team have?

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Exit

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Exit
Source: A. Stotz Investment Research
17. Has the team identified its top
three potential buyers?

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Enthusiasm

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Enthusiasm
Source: A. Stotz Investment Research
18. How many people have I told about this idea
since I learned of it?

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Every startup’s dream
Source: A. Stotz Investment Research
-5,000
0
5,000
10,000
15,000
20,000
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9
US$million
Profit Revenue

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